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Latin America is a diverse region and this is reflected in how countries are making progress on the energy transition. While Chile, Mexico and Brazil have increased their renewable energy production by more than 60% and Uruguay and Costa Rica top the energy transition indices, other former oil jewels like Venezuela are barely making the rounds. But in a region like this, where fossil fuel extraction is shaped by socio-environmental conflicts, it is not enough to see this shift as a path towards renewable energies. It is also a path to justice, inclusion and an economy that leaves no one behind. Here’s how some countries in the region are going:
Chile, the cheapest green hydrogen
The 4,000 kilometers of Chilean territory give the South American country a privileged advantage in the production of green hydrogen. The radiation in the north is higher than in any other part of the world and in the extreme south it also benefits from the high intensity and consistency of the wind. The main goals of the national strategy are to produce the cheapest green hydrogen in the world by 2030, to be one of the main exporters by 2040 and to have an electrolysis capacity of 5 GW under development by 2025.
According to the Chilean Hydrogen Association, there are 42 green hydrogen projects in Chile, 14 of which are in the feasibility phase. In March, Highly Innovative Fuels (HIF)’s Haru Oni pilot project will begin commercial-scale production in Patagonia, becoming the largest clean fuel-based synthetic gasoline manufacturing facility in Latin America.
According to the National Electric Coordinator (CEN) and the National Energy Commission, Chile hit a milestone last year when solar and wind power overtook coal for electricity generation in a 12-month period. 29% of annual production came from solar and wind energy sources and 27% from coal. The South American country needs investment in new transmission lines and energy storage to meet the 2050 decarbonization target it ratified last year.
Wind farm in La Serena (Chile).SOPA Images (LightRocket via Getty Images)
Gabriel Boric’s government signed agreements with the Inter-American Development Bank (IDB) and the World Bank (WB) last November to boost the green hydrogen industry. The sum of both credits for the development of the industry is 750 million dollars (350 million from the World Bank, divided into two phases, and 400 million from the IDB).
To promote the energy transition, the government aimed to push three major regulatory reforms in Congress: promoting an electricity transmission system, creating more bidirectional grids in electricity distribution, and administering a tariff system in the wholesale market. Energy Minister Diego Pardow assured last week that “the political moment” the country is going through cannot be ignored, so they will push just one of those reforms in the next legislature. Which one is not yet known.
Colombia: Big announcements but no plan
The energy transition was once again the focus of discussion in Colombia after Mines Minister Irene Vélez reiterated during the World Economic Forum in Davos that no new oil and gas exploration contracts would be signed. While it bodes well on a climate level, the manner in which the announcement was made – with no plan on how to do it – left many in doubt as to whether it was just an announcement that the government intends to keep behind the scenes. As expert Giovanni Pabón, part of the Transforma think tank, points out, communicating this termination without an economic and social transition plan only creates more doubts.
“There are almost 400 exploration contracts, but the question is whether what’s there is enough to sustain the energy supply in the years to come, say 2030 or 2050. And we don’t have numbers on that,” he comments. Or at least those that Minister Vélez gave are not clear and, according to Finance Minister José Antonio Ocampo, we must await new studies to make a decision.
In Colombia, according to the National Administrative Department of Statistics (DANE), the extractive industry can account for around 60% of exports, so the energy transition is also an economic one. According to a calculation by WWF Colombia and Conexión Análisis, a non-oil, gas and coal-based Colombian production model implies finding economic activity that generates more than 50 billion pesos of GDP annually in the short term.
Hydraulic pumps near an Ecopetrol refinery in Barrancabermeja, Colombia on April 20, 2018. Nicolo Filippo Rosso (Bloomberg)
But the energy transition as planned by the government also forgets the justice part. Andrea Cardoso, professor at the University of Magdalena, Santa Marta, explains that there is an urgent need to discuss economic alternatives for regions dependent on extractivism, how to implement the workforce conversion and what regional reindustrialization policies will be pursued. “For me it’s a mistake that not all ministries are talking about it,” he says. “It’s happening like it did when Prodeco’s departure was announced [una de las empresas de carbón más fuertes de Colombia]what happens without a plan, without a package of measures and therefore causes confusion”.
As for the revenue from renewable energy, it’s still low. The current installed capacity accounts for only 6.53% of the energy when small hydroelectric power plants and combined heat and power plants using biomass are taken into account, and only reaches 1.58% when it is only solar and wind. And although the last government, that of Iván Duque, said that it could go up to 12% with the projects auctioned, the challenge, as Cardoso comments, is that these clean projects do not reproduce the non-participatory logic of the extractive industries.
A post-oil Venezuela that has not thought about the transition
Being the country with the world’s largest oil reserves is too heavy a burden for a Venezuela that, despite its energy wealth, has remained staggeringly impoverished over the past decade. The country is queuing for an energy transition, an issue that is not on the agenda or under discussion but that President Nicolás Maduro has recently mentioned, just as he is experiencing the lean times of an economy that has become post-oil, post-oil the industry had collapsed in years of corruption and mismanagement, and in the midst of a serious erosion of democracy.
The country was ranked 111th out of 115 in the latest report of the World Economic Forum’s Energy Transition Index, lagging the most. “Political and economic actors continue to cling to the fact that fossil fuels will continue to dominate,” explains Antulio Rosales, assistant professor of social sciences at the University of New Brunswick, Canada, a Venezuelan researcher in the economics and politics of natural resource extraction. . Rosales warns that Venezuela is not only exhausted, the country is also lacking in energy, which causes enormous suffering for the population. “Venezuela is facing a predatory, unplanned transition, a mix of mismanagement, corruption and sanctions that has led to a deep debacle.”
Abandoned oil infrastructure in Cabimas, Venezuela on December 3, 2021. Gaby Oraa (Bloomberg)
Although the crisis could be an opportunity, in crucial cases like the negotiating table between the opposition and the government in Mexico, the issue is not considered. Investing in the recovery of the oil industry has been talked about without thinking about the future of this industry and the costs and benefits of ignoring renewable energy. Geopolitical energy policies, disrupted by Russia’s war in Ukraine, aren’t helping either. For some it can be a brake and for others an opportunity to speed up the transition. Venezuela is seizing the moment to step into the limelight as a global energy supplier. And part of the world is pushing for it, even in the midst of the crisis.
The Tocoma Dam, one of the major hydroelectric power generation projects, was abandoned more than a decade ago, not without major misappropriation of assets. A small wind farm in the west of the country never went into operation. The Maduro government, while talking about the energy transition and applauding neighbor Gustavo Petro’s initiatives on the subject, seems focused on reviving Chávez-era oil diplomacy with the reactivation of alliances around Petrocaribe. When PDVSA production is at its lowest, not increasing, and sanctions have made its commercialization difficult, the Chavista leader has channeled his finances into mining extractivism with the exploitation of the Orinoco Mining Arc and its severe environmental consequences. “It’s about time Venezuela had a serious discussion on this issue,” says Rosales. “Eventually, the world economy will face catastrophic scenarios if we don’t start reducing fossil fuels. At some point we will stop using fossil fuels.” By that time, much of the 1.5 billion barrels of recoverable crude oil in the Orinoco Belt reserves will remain underground.
Mexico, between a strike for renewable energy and lithium
Mexican President Andrés Manuel López Obrador’s six-year tenure began in late 2018 with a slugfest that resonated around the world. One of his first directives was to end the renewable energy auctions launched by the previous government, in which the state offered private companies (many of them foreign) licenses to generate electricity from wind and/or solar energy at the best price. In addition, López Obrador (AMLO) reversed much of the legislation that opened up the energy market and concentrated power in the state corporation, the Federal Electricity Commission (CFE). For its part, the CFE has criticized clean energy, even blaming it for blackouts.
Some companies have had to abandon their investments in wind farms as part of the regulator’s effort not to renew and issue new licenses to private renewable energy companies. However, the AMLO administration, as the president is known, has shown signs of openness in recent weeks. He has stated that he is willing to allow renewable energy companies to operate in the country if the project is managed by the Department of Energy and CFE.
A wind farm in Santa Catarina, Nuevo León state, Mexico, on March 26, 2021. Gary Coronado (Getty Images)
López Obrador’s most ambitious plan in the energy transition is undoubtedly the Sonora plan, which includes five solar power plants with a capacity of 1,000 megawatts. The $1,685 million investment will benefit more than four million residents of Sonora and Baja California, officials said. In addition, Mexico has one of the largest unconfirmed reserves of lithium in the world, so the plan also calls for the creation of a semi-public company to explore, produce and export the mineral. According to the decree sent by the executive to the Diario de la Federación, private companies should be able to invest in lithium projects under certain conditions.